fredclaymeyer

Incentives

In Posts on October 6, 2011 at 2:09 pm

One of the most powerful notions I’ve picked up in my study of economics is that “people respond to incentives.” That is, regardless of people’s views, attitudes, and beliefs, they tend to be irresistibly drawn to things that reward them, and neutral to or repelled by things that do not. This view tends to make people a sort of liquid, flowing around the circumstances they’re put in. If people can’t do business through official channels, a booming black market is bound to develop, just as water is bound to flow downhill. The “incentives” model makes extremely powerful predictions of aggregate behaviors, and it’s also helped me to understand elements of my personal life, such as why my actual conduct often falls short of my goals. (Perhaps I feel like I “should” do something more than I do; but perhaps actually doing the thing offers very little reward except guilt alleviation.)

But where does this leave human agency? “Incentives” may be a good way to analyze trends in the aggregate, but an individual’s conduct can—and must—rise above the structural forces acting on him or her. My concern is that students of economics (and other disciplines that deal heavily with incentives) sometimes end up falsely rationalizing cynicism and amorality, by setting their general models of people’s tendencies as the standard of their personal conduct. (I have a stylized image of a disgraced Wall Street banker saying, “Of course I did it; I was incentivized.” Well, fine, but that attitude is the essence of criminality.)

The people I most admire—George Washington and some other founding fathers, certain religious teachers—had incredible integrity. When they knew what they should do, they did it. So in addition to studying the venality of people in the aggregate, perhaps we should study and imitate the integrity of the people we admire. After all, if we model our ethics on averages, we are essentially aspiring to be ethically average—all while demanding inordinate wealth, power, and influence based on our “training.” Depending on how much you blame Wall Street excesses for the current global economic crisis, this is either a recipe for disaster, or an actual cake.

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  1. Lovely thoughts, lovely writing. I hope you are keeping these, because there is unquestionably a book in them. The book comes to me as a modern Emersonian presentation. I also think of Montaigne’s essays.
    Why don’t you just scan their stuff? Love, Dad

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